Commonwealth Electoral Amendment Bill 2001

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

Commonwealth Electoral Amendment Bill
2001

To amend the
Commonwealth Electoral Act 1918 to allow the agent of the
Liberal Party of Australia (the 'Federal Secretariat') to determine
the distribution of election funding between the Federal
Secretariat and the State and Territory Divisions of the Liberal
Party.

Public election funding is relatively new. In
1983 the Commonwealth Electoral Act 1918 (the Act) was
amended to introduce a regime involving registration, public
funding and public disclosure of donations to political
parties.(1) In part public funding was designed to
'assist candidates and political parties defray the direct costs
incurred in a federal election campaign'.(2) It was not
designed to 'subsidise ongoing administration costs or provide a
financial base from which future election campaigns could be
fought'.(3) It was also designed to ensure a degree of
public accountability in the funding of political parties.

Under the new regime, the Australian Electoral
Commission (AEC) was required to disburse funding to registered
political parties following a general election. A party, group or
candidate was entitled to 'election funding' where it received at
least 4 percent of the total formal first preference votes in the
relevant federal electorate. As intended, election funding was only
available to reimburse 'electoral expenditure' or 'expenditure
incurred in connection with the election campaign (whether or not
incurred during the election period)'. Thus, to receive a
reimbursement, a party, group or candidate was required to make a
claim providing a range of information regarding the total
electoral expenditure by the party, group or candidate. Parties
were required to appoint 'agents' who would be the conduit for the
election funding. Typically, the agent would be the secretary of
the party.

Election funding was payable to the 'State
branch' of the relevant party, the 'branch or division of the party
that is organized on the basis of a particular State or Territory'.
Where members of a group of candidates were endorsed by 2 or more
parties, payments were to be made to the relevant State branches of
those parties in such shares as were determined by an agreement
between them that was signed by the agents and lodged with the
AEC.

The AEC was entitled to reject claims which were
not made in the prescribed form or which were not supported by
sufficient evidence. Election funding that had been incorrectly
paid to a party, group or candidate was recoverable as a
Commonwealth debt.

In 1995 the funding regime was amended to remove
the requirement to submit claims,(4) to permit one party
to direct that funding be paid to another party(5) and
to permit the Australian Democrats to appoint a 'Principal Agent'
to receive all of the party's funding.(6)

As a result of these amendments, parties, groups
and candidates were entitled to receive election funding as of
right where they obtained 4 percent or more of the primary
vote. Thus, the direct link between funding and 'costs incurred in
a federal election campaign' was broken. Moreover, the scrutiny by
the AEC was reduced and the distinction between reimbursement for
campaign costs and subsidy for ongoing administration was blurred.
However, the AEC has argued that the original justification was
still relevant:

[Automatic payment] did not alter the underlying
principle that funding was provided to parties and candidates as a
subsidy to their costs of contesting a particular federal election
campaign, although that principle is not spelled out in the
Act.(7)

Similarly, as a result of the amendments the
Australian Democrats were permitted to centralise the collection of
their election funding. Moreover, the Australian Labor Party and
the Liberal Party of Australia were able to achieve a similar
result through agreements between the State branches and the
National or Federal Secretariat lodged with the AEC. To date, the
Australian Democrats have appointed a Principal Agent and the
Australian Labor Party has lodged an agreement providing for the
payment of all entitlements to the agent of the National
Secretariat. The Liberal Party has not lodged any such
agreement.(8)

The Second Reading Speech for the Commonwealth
Electoral Amendment Bill 2001 indicates that its purpose is to
ensure that 'public funding for the Liberal Party is to be paid to
the agent of the ... Federal Secretariat rather than to the State
and Territory Division ... (that is, those State and Territory
Divisions which are constitutionally linked to the Federal
Secretariat)'. Essentially, the Bill achieves this by amending the
Act to:

impose a general presumption that election funding in respect
of the Liberal Party is payable to the Liberal Party of Australia
(the 'Federal Secretariat') as opposed to the State branches of the
Liberal Party (the 'State branches').

allow the agent of the Federal Secretariat to issue a binding
notice to the AEC which prescribes the proportional distribution of
election funding between the Federal Secretariat and each of the
State branches throughout Australia.

The official rationale for the amendments is
that they reflect the purpose and the pattern of election funding
expenditure. Thus, the Second Reading Speech asserts that 'as the
Federal Secretariat of the Liberal Party is responsible for federal
election campaigns', and is therefore responsible for controlling
mass media coverage, etc., 'it is appropriate that all or part of
the public funding be paid to the agent of the Federal
Secretariat'.

At least two other rationales have been put
forward by other commentators.

One rational alleges that the amendments serve
to relieve the Liberal Party of an unnecessary administrative
burden associated with the Goods and Services Tax (GST). Broadly,
the argument is that the payment of election funding by a State
Division to the Federal Secretariat, for the purposes of their
managing a federal election campaign, is a 'taxable supply' under
the A New Tax System (Goods and Services Tax) Act 1999.
While the arrangement is financially neutral from the perspective
of the State Division and the Federal Secretariat (because the
State Division is entitled to reclaim that GST payment in the form
of input tax credits) it does impose a modest compliance burden on
both parties. Peter Wells, the Director of the Western Australian
Division of the Liberal Party, is reported to have observed that
this creates a cash-flow problem for the State Divisions and the
Federal Secretariat.(9) Moreover, he is reported to have
said: 'why mess around with GST if you don't have
to?'.(10) This rationale was rejected by Lynton Crosby,
Director of the Federal Secretariat, who claimed that the
amendments were not related to the GST but 'more accurately
reflected the purpose for which public funding is paid - that is,
for federal election campaigns'.(11)

Another rationale alleges that the amendments
serve to settle an unresolved dispute among the Federal Secretariat
and certain of the State and Territory Divisions. As indicated,
while the State and Federal Branches of parties are entitled to
determine by agreement the distribution of election funding, the
State and Territory Divisions and the Federal Secretariat have not
yet lodged such an agreement with the AEC. Thus, the distribution
of election funding to the Federal Secretariat is effectively
determined on an ad hoc State by State basis. While this autonomy
is consistent with the federal structure of the Liberal Party, it
has the disadvantage that a State Division may 'opt out'. In this
context the Prime Minister was recently reported to have expressed
concern that, following the 1996 federal election, the Queensland
Division 'had reneged on handing over its share of funding'. On
this basis, he was reported to have 'made it clear' the Bill was
going ahead.(12)

Not surprisingly, there have been reports
suggesting divisions between certain of the State Divisions and the
Federal Secretariat over the measures proposed in this Bill. One
Liberal Member was reported as stating that the Bill would make
State Divisions 'mendicants'.(13) The backdrop to this
comment has been a series of interventions by the Federal
Secretariat in the affairs of State Divisions in Queensland,
Victoria and New South Wales. In particular, the Queensland State
Division has been reportedly plagued by factional divisions, 'dire
financial troubles' (debts of $300 000) with threats of a 'federal
takeover'.(14)

Since its introduction in 1983, public funding
for federal elections has grown significantly. As indicated,
funding is determined by the number of primary votes obtained by
the party. The original rate was 60c per vote in the House of
Representatives and 30c per vote in the Senate. In 1995 the 60c was
increased to $1.50.(15) As at June 2001 the rate was
176.554c. The rate at the 1998 election was 162.21c. The indexation
increase to June 2001 is partly a result of an inflation spike
related to the introduction of the Goods and Services
Tax.(16) The growth and mix of total election funding
over this period is indicated in the figures below.

Public funding for elections is also provided
under legislation in New South Wales, Queensland and the Australian
Capital Territory.

New South Wales

Under the Electoral Funding Act 1981
(NSW) two funds are established: the Central Fund and the
Constituency Fund. These funds are drawn from a pool determined by
a formula based on the total number of electors enrolled to vote,
the length of the election period and a 'monetary unit' or payment
rate which is periodically indexed. Two thirds of this pool is
credited to the Central Fund and one third is credited to the
Constituency Fund. Broadly, the Central Fund is payable to parties
and the Constituency Fund is payable to candidates.

The Central Fund operates in a similar way to
the federal election funding regime. Parties and groups are
entitled to funding based on the proportion of primary votes
obtained by the party, group or candidate.(19) No party,
group or candidate can receive more than 50% of the electoral
funding available in the Central Fund.(20) As with the
federal regime, a candidate must poll at least 4 percent of the
primary vote in their electorate.(21) Where a group of
candidates are endorsed by 2 or more parties, provision is made for
the distribution of funding in such shares as agreed by the agents
of the parties.(22)

Queensland

The funding regime in the Electoral Act
1992 (Qld) is broadly identical to the regime in the
Commonwealth Electoral Act 1918. Schedule 1 of the
Queensland Act incorporates the text of the relevant provisions of
the Commonwealth Act. But, the Queensland Act retains the
requirement to account for electoral expenditure and limits funding
accordingly. There are no provisions regarding endorsement of
candidates by 2 or more parties.

Australian Capital Territory

The Electoral Act 1992 (ACT) also
operates in a similar way to the federal regime. Thus, where a
candidate is endorsed by a party, the funding is payable to the
agent of the party.(23) Where one or more candidates are
endorsed by a 'non-party group', funding is payable to a single
person nominated in writing by the group or to each member of the
group in proportion to the votes cast for each
member.(24) Thus, there is no express recognition of
agreements between parties for the endorsement of a single
candidate. Also, a party, group or candidate need only poll
2 percent of the 'eligible votes cast in the candidate's
favour'.(25)

The key provision which deals with disbursement
of election funding is section 299. Broadly, where a candidate is
endorsed by a registered political party, any election funding
payable to the candidate is paid to the State Branch of the party
(subsection 299(1)). Similarly, where a group of candidates is
endorsed by a registered political party for a Senate election,
election funding is also paid to the State Branch (subsection
299(4)). Where the group was endorsed by 2 or more parties,
election funding is paid to the respective State Branches in such
shares as agreed by the agents of those branches, or, in the
absence of agreement, in such shares as the AEC determines
(paragraph 299(4)(b)).

Section 299 makes provision for the payment of
election funding to a Principal Agent appointed by the Australian
Democrats under section 288A.

Item 2 amends subsection 299(1)
to give effect to the regime described above.

Proposed paragraph299(1)(b)
imposes the general presumption that election funding payable to a
State Branch of the Liberal Party must be paid to the agent of the
Federal Secretariat.

Proposed paragraph 299(1)(a) provides for the
payment of election funding in accordance with a notice issued
under proposed subsection299(5E).

Item 3 amends subsection 229(4)
in a similar way, taking into account the existence of endorsed
groups for the purpose of Senate elections.

For groups endorsed by a single registered political
party:

Proposed paragraph 299(4)(aa) imposes the
general presumption.

Proposed paragraph 299(4)(a) provides for the
distribution of election funding between the relevant State
Division and the Federal Secretariat in accordance with a notice
issued under proposed subsection299(5E).

For groups endorsed by 2 or more registered political
parties:

Proposed paragraph 299(4)(ad) imposes the
general presumption. Thus, election funding is payable in such
shares as agreed by the agents of the respective State Branches.
However, the share of election funding payable to a State Branch of
the Liberal Party must be paid to the agent of the Federal
Secretariat.

Proposed paragraph 299(4)(ac) provides for the
payment of election funding in accordance with a notice issued
under proposed subsection299(5E). Thus, the share of election funding
payable to a State Branch of the Liberal Party must be distributed
between the State Branch and the Federal Secretariat.

Item 6 inserts new
subsections 299(5E)-(5G) which
essentially give the agent of the Federal Secretariat the power to
determine for each State branch, a specified federal percentage and
a specified state percentage, effectively determining the
distribution of electoral funding by the AEC.

Strictly speaking, the Federal Secretariat and
the State Divisions of the Liberal Party are separate entities. A
law which permits the Federal Secretariat to determine the funding
entitlements of a State Division would seem to be a law which gives
the Federal Secretariat, a private body, the power to make an
important public funding decision.

The apparent 'outsourcing' of this decision from
the AEC to the Federal Secretariat raises some difficult public
accountability questions. The decision has some attributes which
may be considered 'legislative' in character: it establishes a rule
which must be applied by a public body (the AEC) in performing its
functions. Alternatively, it has attributes which may be considered
'administrative' in character: it effectively determines a private
body's entitlement to a public resource in accordance with a power
given in legislation.

While it is not impermissible to delegate
legislative power to a non-legislative body, it is extremely
unusual to delegate such a power to a non-executive or private
body. Moreover, while it is not impermissible to delegate an
administrative decision making power to a private body, it would
seem to be unusual to do so in a situation where the private body
may be a beneficiary and may not be in agreement with other
beneficiaries. Significantly, the decision making power is
unfettered. No guidance is given in the Bill as to the matters
which the agent of the Federal Secretariat must take into account
when determining the specified federal and state percentages under
proposed subsections299(5E)-(5G).

Centralisation

One of the key themes in the measures discussed
above is the centralisation of federal election expenditure and the
apparent need to centralise election funding accordingly. In the
context of rising emphasis on national campaigns and national
media, there may be strong arguments to adopt a 'Common
Fund'/'Constituency Fund' model that is used in New South Wales. In
this way, a proportion of election funding is preserved for each
electorate, emphasising and encouraging campaign activities at the
local or state level.

The Future of Liberal Party Agreements

Significantly, it is still open for the State
Division(s) and the Federal Secretariat to reach an agreement which
would determine the distribution of election funding by the AEC.
However, the Federal Secretariat still has the ability to issue a
binding notice on the AEC. Moreover, the notice has precedence over
any agreement. Thus, while an agreement may be reached, its
enforceability will depend on the goodwill of the Federal
Secretariat.

Nathan Hancock
20 August 2001
Bills Digest Service
Information and Research Services

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